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Persistent link: https://www.econbiz.de/10011285074
In this paper we develop a discrete-time pricing model for European options where the log-return of the underlying asset is subject to discontinuous regime shifts in its mean and/or volatility which follow a Markov chain. The model allows for multiple regime shifts whose risk cannot be hedge out...
Persistent link: https://www.econbiz.de/10010939531